Fraud, cyberattacks main business risks for ME firms

About 48 per cent of Middle East respondents in a survey cited fraud and corruption as the greatest risk to their company while 38 per cent felt that cyber-attacks as the biggest risk.
The EY Global Fraud Survey found that despite regulators and law enforcement agencies around the world imposing more than $11 billion of financial penalties globally since 2012, corruption risks in the Middle East are still high.
The latest survey results support a similar study conducted by PwC. The study, "2018 Middle East Economic Crime and Fraud Survey - Pulling fraud out of the shadows," showed a significant increase in the number of financial fraud cases at 34 per cent compared to 26 per cent in 2016. Asset misappropriation, business misconduct and fraud committed by consumers are the three most frequent types of fraud and/or economic crime reported by respondents, according to PwC report.
While 97 per cent of respondents in EY study agreed that it is important to demonstrate that their organisation operates with integrity, 39 per cent still think that offering cash payments can be justified if they help a business survive an economic downturn.
"The findings show that there is often a lag between the introduction of stronger anti-corruption laws and a change in behaviour. While new laws and regulations have been introduced and enforcement intensified, non-compliant behaviour still remains, though the Middle East is certainly tackling the issue," said Charles de Chermont, EY Mena Fraud Investigation & Dispute Services Leader.
This year's survey - the 15th EY Global Fraud Survey - found that 42 per cent of executives surveyed in the Middle East believe that corrupt practices still occur widely in business.
"Businesses remain vulnerable to significant financial and reputational harm. Management teams must identify and address the root causes of such conduct in their organisation. Compliance programmes need to keep pace with the impact of rapid technological advancements and the increasingly complex risk environment on business operations," said Charles.
The report finds that individuals shirk responsibility. When asked who is held accountable for ensuring employee integrity, 50 per cent of respondents believe that integrity is the primary responsibility of either management or the board, and only 14 per cent feel that individuals should take primary responsibility for their organisation behaving with integrity.
"Organisations need to make it clear that acting with integrity is everyone's responsibility. The pressing challenge for management and the board, therefore, is to build a robust culture of integrity and compliance in which employees do the right thing because it's the right thing to do, and not just because a company code of conduct says they should. The encouraging news is that with today's advances in forensic data analytics, companies can use technology to detect fraud as they seek to improve compliance," said Charles. According to Nick Robinson, Forensic Leader at PwC Middle East, social and environmental pressures are increasing the focus on fraud and economic crime issues across the region. This increased awareness is clearly articulated in the survey findings as 34per cent of respondents reported fraud and/or economic crime incidents in the last 24 months."
"Technology is proving to be a strong ally. Organisations in the Middle East are making growing use of technology in their anti-fraud efforts, with 82 per cent agreeing that using technology for real time monitoring assists in combating fraud," Robinson.
The PwC study shows that internal audit was the main contributor to detecting the most disruptive fraud experienced by respondents in the last 24 months (20 per cent) followed by internal tip-off's (18 per cent), fraud risk management and suspicious activity monitoring (both at 14 per cent).
"Our study shows that the proportion of organisations that have performed a fraud and economic crime risk assessment within the past 24 months has leapt to 77 per cent in 2018 from 47 per cent in 2016," PwC said. - issacjohn@khaleejtimes.com